9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (12) TMI 1190 - AT - Income TaxPenalty u/s. 271C - TDS default - Period of limitation u/s 275 - Competent officer - reasonable cause for non-compliance with the provisions as envisaged u/s.273B - Assessee in default for not deducting tax at source u/s.201(1) and also levying interest on tax not deducted at source from the date on which tax ought to have paid to the credit of the Central Government till the date on which the payments are made u/s. 201(1A) - HELD THAT - There was actually non-deduction of tax at source by the Assessee but the TDS deducted was given credit only on the basis that the payees have filed their returns of income showing the amounts received from the Assessee and hence the Assessee was given the benefit of TDS deducted to that extent as per the decision of the Hon ble Supreme Court in the case of Hindustan Coco Cola Beverage Pvt.Ltd. 2007 (8) TMI 12 - SUPREME COURT . The plea of the Assessee that failure to deduct tax at source was unintentional and was under the bonafide belief that tax is not deductible on payments in question has to be accepted in the given facts and circumstances of the case. It is also not disputed that the default was noticed only at the time of Survey Proceedings. Taking into consideration the nature of business and small town in which the Assessee carries on business and other circumstances, we are of the view that this is not a fit case for levy of penalty u/s.271-C as the circumstances pointed out above would be reasonable cause for the failure of the Assessee to deduct/short deduct tax at source. We therefore cancel the order imposing penalty u/s.271-C - Decided in favour of assessee.
Issues Involved:
1. Imposition of penalty under Section 271C for failure to deduct tax at source. 2. Reasonable cause for failure to deduct tax at source under Section 273B. 3. Limitation period for imposing penalty under Section 275(1)(c). Issue-wise Detailed Analysis: 1. Imposition of Penalty under Section 271C for Failure to Deduct Tax at Source: The Assessee, engaged in trading cotton, kappas, and cotton seeds, failed to deduct tax at source while making payments covered under Sections 194C and 194H. The ITO, TDS Ward, Davangere, declared the Assessee as an Assessee in default under Section 201(1) and levied interest under Section 201(1A). The ITO also mentioned that penalty proceedings under Section 271C would be initiated separately. Section 271C stipulates that a penalty equal to the amount of tax not deducted can be imposed by the Joint Commissioner if a person fails to deduct tax as required. 2. Reasonable Cause for Failure to Deduct Tax at Source under Section 273B: Section 273B provides that no penalty shall be imposed if the Assessee proves a reasonable cause for the failure. The Assessee claimed ignorance of TDS provisions due to being a small trader in a small town without access to qualified professionals. The Assessee became aware of the TDS obligations only after a survey under Section 133A. The AO rejected this plea, stating that the Assessee's acceptance of the default and payment of taxes indicated awareness of the statutory provisions. However, the Tribunal found that the Assessee's circumstances, including the nature of business and location, constituted a reasonable cause for the failure to deduct tax, thus canceling the penalty. 3. Limitation Period for Imposing Penalty under Section 275(1)(c): The Assessee argued that the penalty order was barred by limitation, as it was passed on 25.7.2016, beyond the permissible period. Section 275(1)(c) stipulates that a penalty order must be passed within six months from the end of the month in which the penalty proceedings are initiated or the end of the financial year in which the proceedings are completed, whichever is later. The AO and CIT(A) held that the initiation date was 22.1.2016, when the JCIT issued a show cause notice, making the penalty order timely. The Tribunal admitted the additional ground on limitation and considered conflicting judicial views. The Tribunal preferred to decide on the reasonable cause rather than the limitation issue, ultimately canceling the penalty due to the Assessee's reasonable cause. Conclusion: The Tribunal allowed the Assessee’s appeals, canceling the penalty imposed under Section 271C due to the reasonable cause established under Section 273B, considering the Assessee's business nature, location, and circumstances. The Tribunal did not conclusively decide on the limitation issue but acknowledged the conflicting judicial views on the initiation date for penalty proceedings. Result: Appeals by the Assessee were allowed, and the penalty under Section 271C was canceled.
|
